GBP/USD – Pound Steady as Inflation Jumps to 3-Year High

GBP/USD is showing limited movement in the Tuesday session. In North American trade, GBP/USD is trading just above the 1.29 level. On the release front, CPI jumped to 2.7%, edging above the estimate of 2.6%. In the US, construction numbers disappointed, as both Building Permits and Housing Starts were weaker than expected. On Wednesday, the UK will release wage growth and unemployment rolls.

CPI, the primary gauge of consumer inflation, continued to move upwards, posting a sharp gain of 2.7% in April, matching the BoE forecast for inflation in the first quarter. This reading marked the strongest gain in CPI since September 2013. The pound briefly responded with gains, as speculation has increased that the Bank of England may raise interest rates to keep inflation under control. The weak pound has contributed to higher inflation, which has hurt wage growth and caused consumers to scale back on spending. The BoE has warned that living standards are set to drop, and the markets will be keeping a close eye on the wage growth release on Wednesday, which is expected to edge up to 2.4%.

President Trump has been pressing the damage control button since last week, as the White House and Congress remain focused on the fallout from Trump’s dismissal of FBI director James Comey. There was more bad news for President Trump on Tuesday, with a report in the Washington Post that Trump had shared confidential intelligence reports with Russia’s foreign minister at a meeting last week. The White House has denied the report, but the timing is particularly bad for Trump, who is already under investigation for possible Russian involvement in the presidential campaign. The markets are concerned that Trump will be so busy trying to put out political firestorms, that his agenda of increased fiscal spending and tax reform will stall. These jitters could hurt investor confidence and send the US dollar downwards.

GBP Dips as Inflation Hits Near-Four Year High

GBP/USD Fundamentals

Tuesday (May 16)

  • 4:30 British CPI. Estimate 2.6%. Actual 2.7%
  • 4:30 British PPI Input. Estimate 0.1%. Actual 0.1%
  • 4:30 British RPI. Estimate 3.4%. Actual 3.5%
  • 4:30 British Core CPI. Estimate 2.2%. Actual 2.4%  
  • 4:30 British HPI. Estimate 5.4%. Actual 4.1%
  • 4:30 British PPI Output. Estimate 0.2%.Actual 0.4%
  • 8:30 US Building Permits. Estimate 1.27M. Actual 1.23M
  • 8:30 US Housing Starts. Estimate 1.26M. Actual 1.17M
  • 9:15 US Capacity Utilization Rate. Estimate 76.3%. Actual 76.7%
  • 9:15 US Industrial Production. Estimate 0.4%. Actual 1.0
  • 9:30 British CB Leading Index. Estimate -0.2%
  • 10:00 US Mortgage Delinquencies. Actual 4.71%

*All release times are EDT

*Key events are in bold

 

GBP/USD for Tuesday, May 16, 2017

GBP/USD May 16 at 12:00 EDT

Open: 1.2894 High: 1.2957 Low: 1.2865 Close: 1.2910

 

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2571 1.2706 1.2865 1.2946 1.3058 1.3121
  • GBP/USD posted gains in Asian trade. The pair posted gains but then retracted in the European session. In the North American session, the pair has edged higher
  • 1.2865 is providing support
  • 1.2946 was tested earlier and remains a weak resistance line

Further levels in both directions:

  • Below: 1.2865, 1.2706, 1.2571 and 1.2471
  • Above: 1.2946, 1.3058 and 1.3121
  • Current range: 1.2865 to 1.2946

OANDA’s Open Positions Ratio

GBP/USD ratio is showing little movement this week. Currently, short positions have a majority (61%), indicative of trader bias towards GBP/USD reversing directions and moving to lower ground.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.